Troubled cryptocurrency exchange operator FTX Group has filed for protection under Chapter 11 of the US Bankruptcy Code in the District of Delaware, revealed a statement posted on Twitter by the exchange.
Filing for Bankruptcy
Over 130 affiliated companies, including FTX Trading, West Realm Shires Services, and Alameda Research commenced the voluntary proceedings seeking protection from FTX group’s creditors under Chapter 11.
According to the filing, Sam Bankman-Fried has stepped down from the role of chief executive officer of the exchange and has been replaced by John J. Ray III as part of the process to review and monetize assets for the benefit of all global shareholders of the exchange.
Bankman-Fried, who stepped down as CEO will remain to assist in the orderly transition, while FTX employees in various countries will continue with the group to assist the new CEO during the proceedings under Chapter 11, the filing explained.
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” said the new FTX CEO Ray in the filing as quoted by CNBC.
On the company’s finances, FXT Group stated in the filing that the group has more than 100,000 creditors, an estimated asset value of between $10 billion and $50 billion, as well as liabilities in the range of $10 billion to $50 billion.
Ray also outlined that the group’s assets need to be “effectively administered in an organized, joint process,” ensuring employees, customers, creditors, and other stake and interest holders that the proceedings will be conducted “with diligence, thoroughness and transparency.”
The new CEO added that the new team has been relatively recently engaged with the proceedings while events have been moving fast, asking shareholders to understand that further information will be provided over the coming days as the team reviews the materials filed on the docket of the proceedings.
A Week of Ups and Downs
The Chapter 11 filing announcement rounded up a week of ups and downs for the cryptocurrency exchange which was impacted by liquidity issues and went from a $32 billion valuation to filing for bankruptcy protection.
The week started with signs that FXT has found a solution to its liquidity issues by offering itself to its rival, Binance, and the rival cryptocurrency exchange has accepted to acquire its troubled competitor. Just a day later, Binance withdrew from their non-binding acquisition agreement, citing consumer funds misuse to leave FTX deal with its issues on its own.
There was more trouble on the horizon as reports emerged that FTX is subjected to an investigation by the US Department of Justice (DoJ) and the Securities and Exchange Commission (SEC).